Pick your poison

I’ve run across Uwe Reinhardt’s name in the course of reading about health care/insurance reform but I don’t think I’ve ever knowingly read any of his writing. Now that I have I strongly recommend his New York Times blog entry: “A ‘Common Sense’ American Health Reform Plan”. When I first read it, I thought is was an excellent argument for as much free-market in health care as we can stomach. The list he sarcastically refers to as:

a short list of the design parameters that an acceptable health reform proposal would have to incorporate to conform with the American public’s idea of “common sense” in health care

clearly seemed to be a natural result of separating the entity paying for health care (government and insurance companies) from the entities providing and receiving that care (doctors, etc., on one side, patients on the other). However, buried in the article is a link (pdf) to a letter Reinhardt wrote in January of 2008. This was a cover letter transmitting to the Governor of New Jersey the Final Report of the New Jersey Commission on Rationalizing Health Care Resources. Once I read that letter I realized the situation is not quite as simple as I thought. It’s not that we’ve separated the payer from the supplier and recipient; it’s that while we have not whole-heartedly rejected that separation neither have we whole-heartedly embraced it. As Reinhardt so clearly describes, we exist in a half-private, half-government system: we have done our best to construct an edifice that takes the benefits from both approaches while taking the costs from neither.

In his letter, Reinhardt identifies four areas in which Americans suffer from “cognitive dissonance” when it comes to health care. I summarize them here but you really have to read Reinhardt to get the full complexity.

1) Distributive Social Ethics: Is health care a social good or a private consumer good?

2) Market vs Regulation:

These mutually inconsistent positions – an instinctive distrust of government and faith in the superiority of private markets but an unwillingness to accept the harsh verdicts of the market – have led nationwide into a bewildering system of “halfhearted competition and half-hearted regulation” for health care,to use a phrase coined by Brandeis economist Stuart Altman.

3) Rationing Health Care: Americans refuse to deny any care to the insured but don’t see the costs involved in doing so as rationing care to the uninsured.

4) Health Insurance itself:
a) Americans reject the idea of requiring individuals to purchase even catastrophic health insurance but also reject the idea that the uninsured should not get medical treatment, apparently not realizing that this imposes an unfunded mandate on hospitals and caregivers.
b) Requiring community rating from health insurance companies without imposing a mandate for health insurance converts private insurers into “quasi-agencies of government, albeit predictably dysfunctional ones.”
c) By rejecting government insurance in favor of employment-linked insurance Americans have chosen to put themselves at constant risk of losing that insurance:

When will it dawn on the American voter that,in an age of fierce global competition and ever novel disruptive technology,any individual American corporation is a fragile institution and, at best, a highly unreliable source of health insurance, especially during retirement?

In summing up this cognitive dissonance, Reinhardt says:

In short, Governor Corzine, in my professional view, the extraordinarily expensive, often excellent and just as often dysfunctional, confused and confusing American health system is a faithful reflection of the minds and souls making up America’s body politic. ... Alas,no Commission can provide a complete blueprint for a truly rational health system for this State – or for any state in the nation – until the citizens of this country reach a politically dominant consensus on a more logically consistent set of preferences for their health system, starting with a consensus on the distributive social ethic that should govern the system. Until that happens, any attempt at “health reform” will always degenerate into mere tinkering at the margin, which means that for the foreseeable future Americans will have to muddle through with the kind of health system we now have.

I think Reinhardt’s letter is an excellent explanation of why our health care system looks like it does. I believe, based on some of what he says in this letter, that Reinhardt thinks we would do better to fully embrace government funding and control of health care. This belief is somewhat reinforced by a later article of Reinhardt’s, called “Lost in the Shuffle.” In that, for example, he seems (although not unambiguously) to be in favor of “reforming the market for small- or non-group health insurance” via a combination of regulation and subsidy:

If (1) either private or public health insurers must accept all comers and may not base premiums on the applicant’s health status, then (2) individuals must be mandated to purchase at least a basic package of health insurance, lest they freeload on the system. Such a mandate, in turn, requires that (3) families be publicly subsidized to make the cost of that basic package affordable to them. A sound reform of the health insurance market cannot have just two of these features. It must have all three.

However, the summary in Reinhardt’s letter clearly recognizes the possibility that the “politically dominant consensus” reached by the citizens could just as well totally reject any government involvement beyond the most minimal regulation and result in a truly free-market system. Again his openness to this possibility is reflected in his “Lost in the Shuffle” article:

On the means to reach the goals there is, alas, still wide disagreement among politicians and the policy experts who advise them. These disagreements are rooted only partly in ideology. They also reflect different and sincerely held perceptions about how competition in the health care sector works, how individuals choose health insurance and health care and how physicians choose clinical responses to given illnesses.

My guess is that Reinhardt would prefer that the United States accept health care as a social good and take the steps that follow from that but at the same time I imagine he believes either a full acceptance of the government or a full acceptance of the free-market would work better than the hybrid we have now.

If so, he’s probably right. On the other hand, there is something to be said for stumbling along with what just grew. Democracy, after all, is an inherently messy business not susceptible to “rational” decision-making, technocratic solutions, or imposed outcomes. If F. Scott Fitzgerald is right that:

The test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function.

then the current US health care system is brilliant. When you think about it that way, “tinkering at the margins” - for example, by insuring the uninsured - doesn’t sound like such a bad thing.

Assuming, of course, that we’re willing to pay the bill - and understand clearly that one way or the other we will eventually have to pay it with our own money.

*****

References:

You can access Reinhardt’s letter as well as the Commission’s Final Report here.

I got to Reinhardt’s “Common Sense” article via his later “Lost in the Shuffle” article. I got to that via Mickey Kaus - who seems to think well of it - and to Kaus via JustOneMinute - who has a serious issue with it.